Strategy Focus: Return to normalcy

We see no spillover of the financial market turbulence into the real economy as the government has maintained prices on a tight leash.

Supported by the normalization of monetary and fiscal policies, we expect to see financial market turbulence subsiding. Shifting national strategy (from growth to stability) should moderate Indonesia’s economic growth going forward. However, we also believe that this constructive strategy shift would reinforce the stability of the nation’s growth, in our view.

We are seeing early signs of foreign investors returning back to Indonesian market supported by reinforced stability and easing concerns over the strength of the USD.

We upgrade our recommendation from “tactical underweight” to “marketweight”: As market is trading near the trough cycle of the valuation rung, macro and market normalizations are likely to drive valuations higher. Our new 12MF JCI target is 7,123pt (revised up by 9.9%) embedding an upside potential of 18.6%.